TransGlobe announces Q2 2017 financial and operating results

transglobeTransGlobe Energy Corporation announced its financial and operating results for the three and six months ended June 30, 2017.  All dollar values are expressed in United States dollars unless otherwise stated. TransGlobe’s Condensed Consolidated Interim Financial Statements together with the notes related thereto, as well as TransGlobe’s Management’s Discussion and Analysis for the three month periods ended June 30, 2017 and 2016, are available on TransGlobe’s website at www.trans-globe.com.

Financial Highlights:

  • Second quarter production averaged 16,465 Boepd (19,259 Boepd sales) versus 11,472 Bopd (11,783 Bopd sales) in Q2-2016, a 44% increase, reflecting increased volumes in Egypt and the December 2016 Canadian acquisition;
  • Completed one direct sale tanker-lifting of TransGlobe’s entitlement oil for proceeds of $18.5 million (sale proceeds collected in July) and sold 302,648 barrels of inventoried entitlement crude oil to EGPC for $12.5 million to cover in-country expenditures during the second quarter;
  • Inventory of 1,274,057 barrels of entitlement crude oil at quarter-end, and next lifting is scheduled for mid-September;
  • Positive second quarter funds flow of $16.9 million ($0.23 per share);
  • Second quarter net loss of $56.6 million (includes a $67.5 million impairment loss and a $6.6 million unrealized gain on derivative commodity contracts). Excluding the impairment charge and the unrealized gain on derivative commodity contracts, the Company would have achieved a positive net profit for the quarter of $4.3 million.
  • Spent $8.2 million on exploration and development during the quarter;
  • Ended the quarter with positive working capital of $60.3 million, which includes cash and cash equivalents of $21.6 million (including restricted cash);
  • Finalized C$30.0 million revolving Canadian reserve-based lending facility, of which $10.0 million (C$13.6 million) was drawn on May 16, 2017 to repay the remaining outstanding vendor take-back note;

Operational Highlights:

  • Drilled five wells in Egypt (two exploration and three development), resulting in three dry holes and two oil wells (K-47 and NWG 38A); and
  • Drilled and cased the Boraq 5 appraisal well as a potential Abu Roash oil well.

transglobe

OPERATIONS UPDATE – ARAB REPUBLIC OF EGYPT

EASTERN DESERT

West Gharib (100% working interest, operated)

Operations and Exploration

No wells were drilled during the second quarter.

Production

Production from West Gharib averaged 6,389 Bopd to TransGlobe during the second quarter, a 4% (293 Bopd) decrease from the previous quarter. First quarter production additions from the infill development wells in the Arta Red Bed pool were offset by natural declines and well servicing of high volume producers.Production averaged 6,036 Bopd during July.

Sales

TransGlobe sold 302,648 barrels of inventoried entitlement crude oil (after royalties and tax) to EGPC for $12.5 million in the second quarter of 2017 to cover in-country expenditures. TransGlobe held 635,414 barrels of West Gharib entitlement oil as inventory at the end of the second quarter.

West Bakr (100% working interest, operated)

Operations and Exploration

During the second quarter, the K-47 development well was drilled and cased as an Asl A oil well in the South-K field.  K-47 was drilled to a total depth of 1,372 meters (4,500 feet) and encountered an internally estimated 23.5 meters (77 feet) of net oil pay in the targeted Asl A formation.  The well was completed and put on production in late May and produced at an average initial 30-day rate of 235 Bopd.

Further, the Company recompleted two wells in the K field in late June, producing at a combined rate of 370 Bopd.  Additional low cost, behind-pipe opportunities in the K and H fields are being scheduled, with related production volumes projected in the third and fourth quarter of 2017.

Production

Production from West Bakr averaged 6,085 Bopd to TransGlobe during the second quarter, a 3% (199 Bopd) decrease from the previous quarter, primarily due to well servicing and natural declines.Production averaged 5,751 Bopd during July.

Sales

TransGlobe lifted and sold 515,626 barrels of Ras Gharib blend in June, all of which was allocated to West Bakr entitlement crude inventory (after royalties and tax).  Subsequent to the quarter, the Company received $18.5 million (~$37.72/barrel) for the June lifting, prior to hedging gains of an additional $1.5 million. TransGlobe held 559,310 barrels of West Bakr entitlement oil as inventory at the end of the second quarter.

North West Gharib (100% working interest, operated)

Operations and Exploration

During the second quarter, the Company drilled one exploration well and two appraisal wells resulting in one Red bed oil well and two dry holes.

NWG 38A 1 was drilled as an appraisal well to the NWG-38A Red Bed oil producer (~600 Bopd) in the NWG Development Lease #1 (“NWG DL #1”).  The NWG 38A1 appraisal well was drilled to a total depth of 5,100 ft.  The well came in 115 feet structurally higher than NWG-38-A, and is internally estimated to have 36.5 feet of tight Red Bed conglomerate oil pay.  The well started production in late June for an unstimulated production test. The well is scheduled for stimulation during the third quarter.

NWG 3A 1 was drilled as an appraisal well to NWG-3X Red Bed oil producer (~600 Bopd) in NWG DL #1.  NWG 3A appraisal was drilled to a total depth of 5,150 feet.  NWG-3A encountered a thick Red Bed sequence (~270 feet) in a structurally low position with an estimated 80 feet of high quality Red Bed reservoir which was wet.  NWG-3A was plugged back to the base of surface casing and suspended for a future sidetrack.   The drilling rig was shut down and stacked on location following the NWG 3A well which concluded the planned eastern desert drilling program for the first half of 2017.  It is expected that drilling in the eastern desert could commence by the fourth quarter, starting with a side track from NWG 3A 1 targeting the Red Bed in an up dip structural position.

The NWG 40 B exploration well, was drilled to a depth of 5,322 feet, fully satisfying all first phase work commitments for the NWG Concession.  The well was abandoned after encountering wet Red Bed reservoir.

Subsequent to the quarter, NWG 16X (tight Red Bed conglomerate discovery in 2014) in NWG DL #1 was stimulated, tied into the NWG early production facility (EPF) and placed on production averaging approximately 100 Bopd over the first 30 days (IP30).

In addition, the Company completed and stimulated one well on each of the NWG 1 and NWG 5 discoveries (discovered in 2014) in late March.  Both wells were put on short term pump production tests to partially recover the stimulation fluid and establish new oil production from the discoveries.  The wells produced ~150 to 180 Bopd.  Following the short production tests, the wells were shut-in pending approval of the respective development leases.  The Company filed development lease applications for the NWG 1 and NWG 5 discoveries prior to May 6th, which was the expiry date of the first exploration phase on NWG.  It is expected that new development leases could receive approval from the Minister of Oil during the third quarter.

The NWG 5 discovery is an upper Nukhul discovery similar to and located immediately south of the Arta Upper Nukhul pool in the West Gharib concession.  The NWG 5 discovery wells (discovery well and one appraisal well) are expected to produce at similar rates to TransGlobe’s Arta Nukhul wells which typically have an initial 30 day production rate (IP 30) of 150-180 Bopd with ultimate recoveries of 120-150 MBbls per well on primary production.

The NWG 1 discovery is located immediately north of the Arta Red Bed (Lower Nukhul) pool in the West Gharib concession.  The NWG 1 wells (discovery well and one appraisal well) encountered a tight Red Bed conglomerate sequence which requires stimulation to produce.  Longer-term production from the NWG 1 wells will be required to establish expected per well recoveries and the associated reserve assignments.

In addition, the Company filed a development lease application for the area immediately north of NWG DL #1 on May 3 which includes the NWG 26 and 27 discovery wells.

TransGlobe has fully evaluated the NWG exploration lands and all commitments have been met at the end of the first exploration period (May 6, 2017). The Company has elected not to enter the second exploration period and has filed development lease applications on the discovery areas.  The Company has relinquished the remaining exploration lands that are not covered by development lease applications.

Production

Production from NW Gharib averaged 1,377 Bopd to TransGlobe during the second quarter, a 40% (395 Bopd) increase from the previous quarter, primarily due to well optimization at NWG 3.Production has averaged 1,187 Bopd during July.

Sales

TransGlobe did not sell its entitlement share of production (after royalties and tax) from NWG during the quarter, which resulted in an ending inventory position (under-lift) of 79,334 barrels.

South West Gharib (100% working interest, operated)

Operations and Exploration

No wells were drilled during the second quarter.   The Company elected to relinquish the concession following completion of the first phase exploration commitment work program.

WESTERN DESERT

South Alamein (100% working interest, operated)

Operations and Exploration

The Boraq 5, commenced drilling in May, to test the down dip extent of the two pools discovered at Boraq 2. The Boraq 5 well has encountered significant drilling difficulties.  The first attempt to reach the target encountered significant caving and lost circulation resulting in a requirement to sidetrack the well to a different location. The well reached a total depth of 8,900 feet measured depth and encountered up to 15 feet of possible pay in the AR ‘G’ Cretaceous oil pool.  The well missed the AR-E channel sands.  The well was therefore plugged back and again sidetracked to a structurally up dip location targeting AR-E channel and the AR-G pool. The side track also encountered significant drilling difficulties but eventually reached a total depth of 8,755 feet measured depth and encountered six feet of AR E channel and 19 feet AR G formation.  The well was cased as a potential oil well, which will be tested following the Boraq 2 test.  The drilling rig is now released and a work over rig will be mobilized for the two well testing program.

The initial drilling campaign consists of one well (Boraq 5) on the Boraq structural complex plus re-entering the Boraq 2 discovery well for additional testing.  Successful appraisal wells could lead to filing a Boraq development plan as early as Q3/Q4-2017 with first production targeted to year-end 2017/early 2018.  In parallel, the Company is evaluating the remaining exploration prospects on the concession, targeting an exploration drilling program commencing in late 2017 and extending into 2018.  The South Alamein concession contains the Boraq 2X discovery and several additional exploration targets.  The Boraq 2X discovery tested approximately 1,600 Bopd from two zones.  The primary Cretaceous zone tested at a rate of 800 to 1,323 Bopd of 34 API oil with no water and a 13% pressure drawdown during a 28 hour drill stem test (DST).  A secondary Cretaceous zone tested at a rate of 274 Bopd of 32-35 API oil and 4% water during a 23 hour DST. Test rates are not necessarily indicative of long-term performance or ultimate recovery.

South Ghazalat (100% working interest, operated)

Operations and Exploration

At South Ghazalat, the Company has met all financial commitments for the first exploration phase and is targeting to have a drill-ready prospect inventory prepared during 2017.  South Ghazalat could be drilled (two wells) in conjunction with North West Sitra in the 2018 exploration program.

North West Sitra (100% working interest, operated)

At NW Sitra, the Company completed the 600 km2 seismic acquisition program at the end of March.  The new data is being processed with prospect mapping planned for the second half of 2017.

(Source: TransGlobe Energy Corporation)

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